An Action Agenda for Nonprofit Board Management Discussions

By: Eugene Fram

The PwC Network has published a list of director considerations related to improving director-management discussions. * Following is my interpretation of how some of the PwC suggestions shown in bold font, might apply to nonprofit directors and managements.

• Continue to challenge the direction and execution of the (nonprofit’s) strategy.
Times change quickly. A strategy established three years ago should be reevaluated for change. No strategy plan should be in place or more than 5 years without complete overhaul or substantial modification.
• Understand mega-trends and discuss how they may impact the nonprofit.
There are a number of nonprofit related mega-trends, such as employing Big Data Analytics that need to be carefully monitored. Examples: Calculating nonprofit overhead costs has been the topic of debate and will continue to be reviewed. (See: http://bit.ly/1g6JJ34) In the counseling field, medication innovations continue to supplant “Talk Therapy.” Ignoring these trends and others in the 21st century is a recipe for long-term problems.
• Understand the relevance of emerging technologies to the (nonprofit) and prioritize them. Discuss with management how these technologies can be used to drive (client related) growth and how risks will be managed. Discuss with management whether all material information is provided in the financial statements to give readers a clear picture of the (nonprofit’s financial condition), including unusual transactions entered into and the risks the (nonprofit) faces.
Emerging technologies are considered confusing issues for both directors and managers. They require substantial financial investments that require some technical knowledge. Both groups will need to become acquainted with new fast moving fields to make decisions effectively/efficiently and to make wise use of financial resources.
• Discuss with management how the (nonprofit) is enhancing cyber security and asset security.
A hacking, fire or record theft can literally close operations. It is a risk that just can’t be ignored and needs to be fully discussed, even if outside risk counsel is needed to assist with the discussion.
• Actively engage in talent discussions and understand where potential talent gaps exist, considering the (nonprofit’s) overall strategic objectives and related risks. Discuss trends in the (nonprofit’s) retention rates, particularly for high performers.
High staff performers are usually a nonprofit’s most important assets and need to be treated accordingly. Some insecure nonprofit CEOs may not recognize high performers, and it will be the board’s duties to determine whether such situations exists. As a routine process, the board needs to be realistically apprised of the talent gaps that can impede mission outcomes.
• Hold discussions, with the CEO, about CEO (interim secession because of illness). Have a (a board developed) succession plan in place if the CEO resigns abruptly.
Knowing what steps to take in both of these situations are vital for organization continuity. These succession plans should be reviewed annually.
• Ensure management is fostering an atmosphere that makes compliance and ethics part of everyday dialogue, encourages employees to speak up and trains management on how to respond to allegations. Discuss with management the effectiveness of the (nonprofit’s) ethics and compliance programs and policies, including internal controls, compliance testing and resource allocations.
These efforts require the organization to have a robustly active audit committee. The committee needs to interact with the external auditors and any employed internal auditors several times a year, provide employee access to a “whistle blower” system and let it be known among the staff that the board is alert to detecting fraud. (See: http://bit.ly/KqxIvB)
• Think about whether the boards’ approach to stakeholder communications is appropriate or needs revisions. Consider whether enhancements should be made to communications with (stakeholders).
Stakeholders are looking to both for-profit and nonprofit boards to be more personally accessible and to provide more information about how they are over-viewing operations. Some nonprofits are including their annual IRS 990 Forms on their websites. Some funders are personally interacting with nonprofit boards to assess the engagement of the board members. Funders continue to inquire about the percentage of board members that make financial donations to the organization each year.

Summary
These considerations proposed by PwC Networks may appear overwhelming to some nonprofit boards. However, if implemented intelligently and in relation to the realistic needs of the organization, they can provide a 21st century board leadership format that will attract director candidates who enjoy being associated with a professionally functionally nonprofit board.

* The PwC Network (2013) Boardroom Direct® Update on the current board issues: December.